ABOUT SEAN STANNARD-STOCKTON

Sean Stannard-Stockton is the president and chief investment officer of Ensemble Capital Management, located in Burlingame, CA, midway between San Francisco and Silicon Valley. From 2006 through 2012, Sean authored the Tactical Philanthropy blog and wrote regular philanthropy columns for both the Financial Times and the Chronicle of Philanthropy. In 2012, Sean officially ended the blog to focus on growing Ensemble Capital.

Search Tactical Philanthropy

Archives

Archives

Prize Philanthropy

October 8, 2007 – 1:20 pm

My father is a university professor who runs a number of “service learning” initiatives. Recently I’ve been helping him on his application to win a Fidelity Charitable Gift Fund grant to launch a philanthropy class at his school. Last week he told me that even if he doesn’t get the grant, he wants to find a way to launch the class. I’m sure that many of the other schools that apply for the grant will decide that since they now have a fully designed program that they’ll launch the project with or without the Fidelity grant.

This got me thinking about the concept of prize philanthropy, an idea I’ve been wanting to write about since I read a post back in September by Peter Diamandis, the CEO of the X PRIZE Foundation.

Incentive prizes are a time-honored mechanism for driving breakthroughs. One of the most famous prizes in history — the Longitude Prize of 1714 — led to the development of accurate nautical navigation. In 1919, Raymond Orteig offered a $25,000 prize for the first nonstop flight between New York and Paris. The competing teams spent $400,000 in pursuit of the purse, multiplying Orteig’s investment 16x. Charles Lindbergh won the prize in 1927. His victory captured global attention and launched a new aviation industry that revolutionized the way people travel.

Large incentive prizes break through market and government bottlenecks. They reach across national and disciplinary boundaries and attract the intellectual and financial capital required to achieve breakthroughs through innovation. Public competitions shape public attitudes and spur innovation adoption.

An incentive prize for achieving a specific goal stimulates entrepreneurial investment that produces a 10x – 50x return on the prize purse, and at least 100x in follow-on investment and social benefit. It offers foundations and philanthropists the opportunity to complement conventional giving strategies with low-risk, highly efficient, highly leveraged approaches. Best of all, purses are only paid on success.

Prizes are also incredibly liberating for the competitors. Unlike a grant, a prize does not impose budgets, reporting requirements or overhead. It frees entrepreneurs from the constraints they find most limiting. It says, "I don’t care where you’re from, where you went to school, if you have ever gotten a government grant… If you achieve the goal, you win and get the cash."

Go back to the philanthropy course now. Fidelity is offering a relatively small grant, but it will spur the creation of a number of philanthropy courses around the country. Prize philanthropy is not the answer to many philanthropic problems, but it is probably a good approach to spurring philanthropic innovation. Think about the difficulties we’ve discussed in measuring social return on investment. What if the major foundations came together and offered a “Nobel Prize” in philanthropy that would honor the person with the most important innovation of the year. They could back it with a $1 million prize (not grant, I’m talking a cash prize to the winner). Think about the legions of grad students, program officers, nonprofit employees, consultants, and every day people that would begin thinking about the problem. Since philanthropy has the unique advantage that social returns benefit everyone, the problems that were solved through this process would lift up the entire field. It would not just be the winning solutions that would benefit the field, just the process of taking up the challenge would lead to many other breakthroughs.

I’ve talked about the need for mainstream media coverage to “honor” people in philanthropy and about the idea that the Slate 60 (list of largest donors) needs to be replicated in the foundation field to honor the most innovative foundations or the ones creating the most impact. Instead of asking “outsiders” to support this process, maybe foundations themselves can begin the process. While “lifetime achievement” awards or recognition for big grants are already in existence, I think that a prize or award for impact and/or innovation is what we need right now.

“Think about the legions of grad students, program officers, nonprofit employees, consultants, and every day people that would begin thinking about the problem.”

Doesn’t this imply that all of these gifted folks are not currently thinking about these issues?

Also, I sometimes wonder about the value we place on innovation. Don’t get me wrong we cretainly want to do things as efficiently as possible…but sometimes doesn’t it simply require that we roll up our sleeves and just dig in and do the work?

@Holden: There are ways to make “innovation” clearer as a goal to work towards without being forced to abandon the general concept of “innovation” in favor or some more direct implementation; for example, why not showcase examples of projects which may have demonstrated innovation in the past, which would have been candidates for such an award, with more commentary on how / why they were innovative? That should clarify (and also inspire) an audience of could-be innovators.

@Suzy: Actually, it does imply that those gifted folk aren’t thinking about these issues, and he’s right to do so; for every thinker who motivates himself to ponder and implement an innovative solution, a hundred others fail to find that last spark of motivation and content themselves with implementing less efficient, often unsuccessful models. It’s sometimes necessary for an extra-organizational force to address the sector as a whole before these inefficiencies are even recognized, let alone addressed.

All too often, we “dig in and do the work” …incorrectly, inefficiently, and sometimes even counter-productively.

It’s an interesting idea on the “how do we measure impact” question. A wide open prize would allow innovators, to some extent, to demonstrate impact using their own language, their own measures, and their own frameworks; but I’m not sure we’d have an effective means of measuring or comparing these claims at the end of it all. In other words, I think it would generate a ton of ideas on measuring impact, but might not lead to any conclusions.

On the other hand, it would result in a panel of foundations comparing and even judging varying ideas on how to measure impact, coming directly from innovators who seek to lead the sector; this cannot be a bad thing.